Starting a Limited Liability Company (LLC) is one of the most popular ways to protect your personal assets while running a business in the United States. However, many new business owners wonder: Can you run an LLC without insurance? The short answer is yes, you can legally operate an LLC without business insurance, but it is highly risky. This guide explains the role of insurance in LLCs, the risks of operating without it, and why having coverage in 2025 is more important than ever.
Is Business Insurance Required for an LLC?
In most cases, the law does not require an LLC to purchase business insurance in order to operate. Forming an LLC already provides limited liability protection, which means your personal assets (such as your house or car) are generally safe from business debts or lawsuits. However, this protection has limits. Without the right insurance, your LLC could still face major financial risks.
Some exceptions where insurance may be legally required include:
- Workers’ Compensation Insurance: Required if you have employees.
- Commercial Auto Insurance: Required if your business owns or operates vehicles.
- Professional Liability Insurance: Required for certain licensed professions in some states (e.g., lawyers, doctors, real estate brokers).
Risks of Running an LLC Without Insurance
Even though you can legally run an LLC without insurance, here are the major risks:
- Lawsuits and Legal Claims – If a client sues your LLC for damages, your business assets could be seized. If those assets are not enough, courts may find ways to pierce the corporate veil.
- Property Damage – Fires, theft, or natural disasters can destroy equipment or inventory. Without insurance, you must pay out of pocket.
- Employee Injuries – If an employee gets injured and you don’t carry workers’ compensation insurance, you could face penalties and lawsuits.
- Client Disputes – Without professional liability insurance, mistakes or negligence claims could cost your business thousands of dollars.
Types of Insurance LLCs Should Consider in 2025
While not always mandatory, having the right insurance is highly recommended. The most common types of LLC insurance include:
- General Liability Insurance: Covers lawsuits, accidents, and third-party injuries.
- Professional Liability (Errors & Omissions): Protects service-based businesses against negligence claims.
- Commercial Property Insurance: Covers your office, equipment, and inventory.
- Business Owner’s Policy (BOP): Bundles general liability and property insurance.
- Workers’ Compensation Insurance: Required in most states if you have employees.
- Cyber Liability Insurance: Increasingly important in 2025 to protect against data breaches and cyberattacks.
Why Insurance Matters for LLCs
An LLC provides legal protection, but it does not protect your business assets. Insurance fills this gap by covering risks that the LLC structure alone cannot handle. Without it, even a single lawsuit or accident could bankrupt your company.
Key Benefits of Having LLC Insurance:
- Protects against lawsuits and claims.
- Builds trust with clients and partners.
- Helps meet contract requirements with vendors or clients.
- Ensures business continuity in case of accidents or disasters.
Common Misconceptions About LLCs and Insurance
- Myth 1: Forming an LLC eliminates the need for insurance – False. LLCs protect personal assets but not business property or operations.
- Myth 2: Small LLCs don’t need insurance – False. Even freelancers and small businesses face risks.
- Myth 3: Insurance is too expensive for startups – False. Many policies are affordable and tailored to small businesses.
Conclusion
So, can you run an LLC without insurance? Yes, but it is a dangerous gamble. While the law does not require every LLC to have business insurance, operating without coverage leaves you exposed to lawsuits, accidents, and unexpected losses. The smartest move in 2025 is to secure at least general liability insurance and explore additional coverage based on your industry and risks.
✅ Tip: Want to learn more about protecting your LLC? Read our in-depth guides on [Are LLCs Tax Exempt in the USA?].